The Good News Blog

Well not too much to say because not too much has changed. Clearly, the economic environment has caused a massive impact on the country. The level of tax collected is dropping and pressures on social services are increasing. So the budget has not really changed too much, more re allocated some funds and definitely dampened expectations with the aim of controlling increasing debt levels. However, I will cover the few areas of change or no change when change was planned. First, the promised tax cuts scheduled to take effect from 1 April 2010 and 1 April 2011 are indefinitely delayed. Kiwisaver – no changes other than the closure of the mortgage diversion facility. Interestingly, apparently only 600 people had taken up this option so far. R&D – some additional spending via the CRI Capability Fund, the Marsden Fund and health research. Public sector spending – overall the government departments and agencies will spend more than current levels but the increases are less than previously planned. SME’s – more comment that simplification is coming, but we are still waiting. Infrastructure – the announcements in this area have been well signposted for some months – spending on broadband, roading and more recently mentioned is the subsidy on home insulation and heating. These are areas that potentially could do with additional spending provided they result in improvements to the productivity across the economy. So overall, the most interesting element will how the newspapers fill the column space they have dedicated to discussing the budget.

The Corporations Law and the general principles of corporate governance require a Director to diligently perform his/her duties. Many Directors have found the use of a checklist assists them in ensuring that they and their fellow directors are receiving adequate information to enable them to perform their duties diligently. Some of the items that the directors should be asking for include: - Monthly report prepared by the Chief Executive Officer - Monthly financial report prepared by the Accountant or Chief Financial Officer containing: - Detailed Trading and Profit & Loss Account, preferably on a departmentalised basis - Balance Sheet - Report showing actual performance vs. budget - Report on Sundry Debtors (including Debtors' Aged Analysis) - Report on Sundry Creditors - Bank Position - Cost of Stock & Work in Progress - Details of any creditor or other liability that has not been paid in accordance with the supplier's terms of trade and in particular details of any amounts that are outstanding to the IRD, Income Tax, PAYE etc. - Details should also be submitted of any superannuation payments that are outstanding - Details of any litigation started by the company or against the company - Details of any harassment allegations made by any employee or other person against anyone associated with the company - Confirmation that all government statutory documents required to be lodged during the previous month were lodged on time. This would include lodgement of: - Annual Returns to Companies Office - Income Tax Returns - Fringe Benefit Tax Return - Business Activity Statement - Grant Applications - Details of any correspondence from the company's insurer relating to increased premiums or rejection of a claim - Management Meeting Minutes - Updated Budget & Cashflow Forecasts - Periodically during the year, Directors should be receiving reports on: - Staff Turnover - Staff Evaluations - Staff Salaries - Customer Survey Results - Business Plan Implementation - Internal Control Review - Reports from the Audit Committee (if the company has one) - Summary of exit interviews conducted by the company Be sure to read each article with the mindset “How this could apply to our business”. Thinking of it that way will guarantee that you get value. Also make copies for each team member. To really make sure something positive happens, work with your business development specialists to talk your team through ideas.

You wouldn’t go on a cross-country holiday without looking at a road map to work out where you are planning to stop and what sightseeing activities there are on the way. Planning the start of a business is no different. You need a plan that you have sat down and thought about and then preferably committed to writing. The business plan should consider how the business is going to operate, what the market is for the business’ products or services and consider strategies for how sales are going to be made to the potential customers. If you are planning to commence a business, we can assist you in the preparation of a specifically tailored business plan to suit your business objectives.

Business Review: - Why are you in business? - What business are you in? - Who is your market? - Who are your customers? - What differentiates your business? - Do you have to improve cost control? - What share of the market do you have? - What is the current size of your business? - What are your aspirations for the business? - What is your annual growth rate? - Are there any improvements required to customer service? - Do there need to be productivity improvements? - Are you happy with employees’ performance and development? - Are you happy with your own personal development and performance? - Are quality control procedures introduced and working? Financial Analysis: - Analysis of the trading profit and loss performance of each business grouping within your business including: ▫ your gross profit percentage ▫ number of sales per staff person ▫ average sale ▫ key expenses including advertising, marketing, salaries/wages and rent ▫ percentage of key expenses to turnover ▫ percentage of total expenses to turnover; and ▫ how does this financial performance compare with competitors?

One of the biggest problems that businesses have at present is retaining team members. Obviously, it costs a lot of money to advertise, interview, recruit and train a new team member. If staff turnover can be reduced this will contribute to lower costs for a business and a happier workforce. One way to contribute to staff morale is by holding regular team meetings. The purpose of a team meeting is to inform the team on what is happening in the business, both the good news and the bad news and to seek input from team members on their thoughts on various aspects of the business operations. You should encourage your team members to contribute their ideas. You won’t get this contribution unless management has shown the team members that they are interested in them and are keeping them informed on progress within the business. Many businesses conduct weekly team planning meetings and conduct a monthly team meeting, where the CEO gives a ‘state of the nation’ overview of where the business is, the direction that management is planning for the business and seeks comment and feedback from team members.

At the risk of you reaching for the delete key straight away – I would STRONGLY recommend that you should all read the guide in the following link on Internal Controls. I have to admit that at 30 odd pages it may seem imposing but it should take no longer to read than the morning paper. The reason I am urging you all to read this guide and consider the implications for your business is that it will either highlight areas for attention with your current level of internal controls or confirm that you are on top of your business. A great recent example of deficit internal controls was the Westpac’s error in allowing a $10m overdraft when a $10,000 overdraft was applied for! The guide is produced and published by the CPA Australia, which is one of the world's largest accounting bodies with a membership of more than 122,000 finance, accounting and business professionals across the globe.

Understanding financial statements is a task that many business owners often put aside to concentrate on something more interesting. This results in many business owners not really knowing what is going on with their business, especially the cash flow control within the business. Cash is the lifeblood of any business and it is the fuel that keeps the engine running. It is vital that business owners understand all there is to know about the flow of cash into their business and the flow of cash out of their business. The movement of cash is recorded within the financial statements, which are very useful as a tool to help in the management of the business. Financial statements are required by business owners to understand how their business is performing. In addition to this, there is normally a requirement to produce them for banks and investors. Financial statements concentrate on measuring profit or loss. They may then facilitate the preparation of cashflow reporting and key performance indicators that enable meaningful management information for your business. The key components of financial statements are: - Departmentalised Trading Profit and Loss accounts with gross profit percentage calculations for each department - Balance Sheet - Supporting verification work papers - Cash Flow statement - Debtors’ Aged Analysis - Stock on Hand Analysis - Work in Progress Analysis - Creditors’ Aged Analysis - Capital Expenditure Summary - Bank Account Analysis Preparation of financial statements on a regular periodic basis can contribute greatly to the management of a business. Some businesses find it very useful to produce a weekly performance report and detailed monthly financial accounts. If you have any queries on any aspect of the interpretation of your financial statements, please do not hesitate to contact us.

Stephen was recently interviewed on the issues and outcomes of conversion to and use of Xero. The focus was in relation to not for profit organisations, in particular it related to his voluntary role as Treasurer for Unlimited Potential. Follow the link for the article and sound file. Check out the webguide interveiw and soundfile on Webguide's blog "Groupings" here.

Despite what some might say, the number of individuals and companies who aren’t participating in the recession remains more stubbornly high than many news reports suggest. But what about entire economies? One of New Zealand’s closest neighbours, the Cook Islands, is not only claiming such a status for itself, but has even gone so far as promoting itself as the world’s first Recession Free Oasis. The island-nation’s Tourism Minister, Wilkie Rasmusssen, this week said that travellers tired of the worldwide gloom visit the Cook Islands, a place “devoid of the R-word”. The minister said that the Cooks is heavily dependent on tourism, and, while much of the world suffers, the local industry there is reporting sustained forward bookings, along with many new operators starting up and more and more people being employed. A ticket to Rarotonga, anyone?